Description: This case deals with whether disability benefits should be provided to Rufus Caldwell by Life Insurance Company of North America (LINA). LINA denied Mr. Caldwell's claim for both "own occupation" and "any occupation" long-term total disability benefits.(1) On review, the district court upheld LINA's determination as to "any occupation" benefits, but held that Mr. Caldwell is entitled to "own occupation" benefits for disability resulting from injuries suffered while working for Western Atlas International (Western Atlas).(2) It also awarded prejudgment interest to Mr. Caldwell. We affirm in part and reverse in part.

I.

From November 3, 1975 until April 28, 1989, Rufus Caldwell was employed by Western Atlas International ("Western Atlas"), an oil drilling services company. Mr. Caldwell held a number of positions during his tenure at Western Atlas, including rig hand, completion engineer, senior completion engineer, and customer service representative. In the last of these jobs, which he held at the time of his accident, he was required to perform the relatively sedentary duties of a normal customer service representative, as well as a variety of more physically-demanding tasks. Western Atlas listed Mr. Caldwell's duties as involving sitting (75%), walking (10%), standing (8%), bending (5%), reaching (1%), and stooping (1%). App. vol. II at 294. The company also stated that Mr. Caldwell was occasionally required to carry, push, pull and lift objects weighing between 50 and 100 pounds for distances of 20 to 30 feet. Id.

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Most significantly for present purposes, the company required Mr. Caldwell to lift and move heavy objects with some regularity, including anything from a 30-pound logging tool to his share of a 450-pound perforating gun. Id. at 1110; see also id. at 1160. It is undisputed that Western Atlas expected Mr. Caldwell to fulfill the non-sedentary duties of other positions, especially that of rig hand, as needed by the company.

Oil drilling is a physically demanding job that results in a great number of on-the-job injuries. Mr. Caldwell's medical history demonstrates the toll the work took on his body. He suffered repeated injuries throughout his decade and a half with Western Atlas that caused him chronic neck, back, knee, and elbow pain. On January 31, 1989, Mr. Caldwell was injured while fulfilling rig hand duties at a drilling site. Id. at 1159 ("I was going to help my hand rig down; we were shorthanded."). He was descending from a truck when he caught the toe of his boot on a step and fell to the ground. As a result of the fall Mr. Caldwell suffered a chip fracture and severe sprain in his ankle. He went to Dr. L.T. Fleske, who placed his ankle in a cast. Mr. Caldwell was on crutches during the time he wore the cast. Dr. Fleske removed the cast on February 20th and by March 6th allowed Mr. Caldwell to discontinue use of the crutches. Nevertheless, pain and swelling in his ankle did not subside.

In seeming contradiction to the claim that he was disabled, Mr. Caldwell did not miss any work in the months after he was injured. However, he testified that Western Atlas had him come to work to perform only the sedentary duties of his job. Thus, Mr. Caldwell testified in his deposition that "[w]hile I was in the cast, I did customer service work; and after the cast was off, I did what little I could do around the shop. If they would tell me to do what I couldn't do, I didn't do it." Id. at 1168. He also testified that, at the time he was laid off, he was not able to do the part of his job that required lifting. Id. at 1209. This evidence is not disputed.

On April 28, Western Atlas terminated Mr. Caldwell. His ankle pain persisted in July when Dr. Fleske saw him for the last time and recommended that he continue physiotherapy and see a bone specialist in Oklahoma City, closer to his home. On July 6, 1989, Mr. Caldwell saw Dr. Larry White in Oklahoma City. Dr. White noted that Mr. Caldwell continued to suffer a "great deal" of ankle pain and was suffering constant low back pain that worsened with activity. Id. vol. III at 774. The ankle swelling and pain still persisted in November, at which time Dr. Glenn Smith concluded that Mr. Caldwell had a permanent disability due to the loss of range of motion and chronic pain in his ankle. Id. at 766-67. The doctor advised Mr. Caldwell that he would not be able to return to the type of employment that he had prior to the injury. Id.

Mr. Caldwell subsequently spent a year working as a self-employed truck driver, delivering materials to drilling sites after Western Atlas terminated him. The job required no heavy lifting, and he discontinued this business when his doctors ordered him to do so, because even driving aggravated his back problems.

LINA, a division of CIGNA Corporation, provided life insurance and disability coverage to employees of Western Atlas. LINA was both the administrator and insurer of the plan. In March 1994, after learning about the disability policy, Mr. Caldwell filed a claim with LINA for disability benefits and also added LINA to the present federal court action that he had pending against Western Atlas for wrongful discharge.(3) Under the policy held by Western Atlas, LINA was required to pay "own occupation" disability benefits to an employee for the first twenty-four months after sickness or injury if the employee was "unable to perform all the essential duties of his occupation." Id. vol. II at 277. LINA denied Mr. Caldwell's claim in July 1995 on grounds that he had failed to establish he was totally disabled within the meaning of the "own occupation" provision of LINA's policy. This determination accordingly precluded Mr. Caldwell's claim for "any occupation" disability benefits as well.(4) Mr. Caldwell appealed the denial to the district court, which held that LINA had not conducted a full and fair review of the claim and remanded it for further administrative proceedings. Caldwell v. Life Ins. Co. of N. Am., 959 F.Supp. 1361, 1367-69 (D.Kan. 1997)(Caldwell I).

LINA conducted a second review of the claim and, in a letter dated October 24, 1997, it again denied Mr. Caldwell both "own" and "any occupation" disability benefits. On review of this second denial, the district court held the LINA administrator's decision was arbitrary and capricious as to "own occupation" benefits. The court determined Mr. Caldwell was, in fact, disabled from performing all the essential duties of his own occupation at the time he was fired by Western Atlas, and that this disability continued through January 31, 1991. Caldwell v. Life Ins. Co. of N. Am., 37 F.Supp.2d 1254, 1261-62 (D.Kan. 1998) (Caldwell II). The court affirmed the administrator's decision denying "any occupation" benefits for the period thereafter. Id. at 1262.

On appeal, LINA raises two issues. First, it claims the district court erred in reversing the LINA administrative decision as arbitrary and capricious because, LINA maintains, the district court misapplied the sliding scale standard of deference applicable to administrative decisions. Second, LINA claims the district court abused its discretion in awarding prejudgment interest to Mr. Caldwell.

Outcome: In sum, we AFFIRM the determination of the district court as to Mr. Caldwell's "own occupation" disability claim, we REVERSE as to its calculation of the date from which prejudgment interest is owed, and we REMAND for a new calculation of the rate of prejudgment interest in accordance with this opinion. With respect to the cross-appeal, we REVERSE the district court's determination as to Mr. Caldwell's "any occupation" disability claim and REMAND to the district court with instructions that it REMAND the matter to the LINA claims administrator for further findings of fact pursuant to the plan's standard for "any occupation" disability.